On the front lines of the housing crisis: A conversation with Julie Gugin of the Minnesota Home Ownership Center

As the foreclosure crisis grinds on and the economy slowly recovers from the Great Recession, housing counseling agencies are dealing with high demand and dwindling resources. To learn more about the trials and trends that housing counselors are experiencing, Community Dividend spoke with Julie Gugin, who has served as executive director of the Minnesota Home Ownership Center since 2007.

The Minnesota Home Ownership Center is a statewide, nonprofit intermediary that coordinates the efforts of the Homeownership Advisors Network, a group of more than 50 independent housing counseling agencies in Minnesota. The Center's business model is unique; no other state has a comparable intermediary organization in place. Since its establishment in 1993, the Center has worked to ensure its partner agencies are delivering high-quality foreclosure counseling and home buyer education services that meet stringent local and national standards.

Funding for the Center's work consists of grants and donations from local, state, and federal government agencies; foundations; and private companies. The Center offers its services to all Minnesotans but seeks to target low- and moderate-income individuals who may face barriers to achieving or sustaining homeownership.

Community Dividend: As the only state-level intermediary for nonprofit housing counseling agencies in the country, the Minnesota Home Ownership Center has a unique business model. What advantages do you think the model offers?

Julie Gugin: Our position as a centralized agency for the counseling industry for the entire state enables us to drive changes within our member agencies that wouldn't otherwise be possible. That allows us to be quick, responsive, and effective when the environment changes. Our position also enables us to be nimble in securing resources for our partners. The foreclosure crisis is a prime example. When the scale of the crisis became apparent back in 2007 and 2008, we were quickly able to partner with Minnesota Housing, the state housing finance agency, to secure national resources for foreclosure counseling as soon as those resources became available.

Even as the volume of foreclosure prevention counseling cases peaked, demand for our pre-purchase services to prospective home buyers grew, especially when the federal first-time home buyers' tax credit was in effect. First-time buyers who purchased homes with funds from the federal Neighborhood Stabilization Program were required to receive pre-purchase counseling, and that added to our pre-purchase client volume. As the statewide entity, we were quickly able to identify the organizations in our network that had federally certified counseling services suited to meet the groundswell of pre-purchase demand. We then allocated resources accordingly and met all facets of the demand.

CD: You mention that it's often easier to facilitate changes with your member organizations using this centralized business model. Could you provide an example of how you were able to do that?

JG: As it relates to the foreclosure crisis, we recognized in late 2007 that the need for counseling services was growing dramatically. At times, borrowers were waiting up to two months to receive counseling. To meet the demand, we needed to do two things. First, get more resources into the network. Second, figure out a way to offer our programming differently. Under the program model we had in place at the time, counselors would work diligently over long periods to try and keep homeowners in their homes. We recognized that even if our financial support from donors increased, we'd be left short unless we looked at ways of being more efficient and using our resources more wisely. So we instituted a new program model that focuses first on identifying consumer needs and then on selecting one of several service paths that best serves them. Our new model recognizes the economic realities homeowners face and the amount of time and resources it takes counselors to work through a case.

After we adopted the new program model, we realized we had to make some hard decisions. Some homeowners, after our initial assessment, had to recognize that they wouldn't be able to stay in their homes, even with extraordinary amounts of effort on the part of counselors. For our organizations, we determined it just wasn't the way we should be spending our resources. Instead, we needed to help homeowners make a soft landing in their next housing situation by making them aware of their options and opportunities.

CD: Are there other significant changes you've had to make in the Center's model to try to do more with less?

JG: We're trying to address program sustainability across the network. On the home buyer front, we realize that we can do things differently. Right now, when consumers reach out to our organizations, we talk with them about the availability of our Home Stretch home buyer education classes or our one-on-one counseling. Based on our work with foreclosure prevention counseling, we're shifting our thinking to a triage approach. We have to find a way to deliver the best resources to each consumer who reaches out to us, as opposed to directing consumers immediately to an eight-hour Home Stretch class. We've come to the conclusion that buyers shouldn't all be treated the same. There's a timeline of home buyer readiness that we need to be ready to support.

For foreclosure prevention counseling, we're now looking at conducting group intake sessions, versus completing consumer intake over the phone. Instead of spending an hour on the phone to do intake for each person, we're doing intake with multiple people in one session to more efficiently serve larger numbers of consumers with fewer staff. We've implemented this change quickly and in a way that maintains standardization and quality across the state.

CD: Are counseling agencies in other parts of the country refining their approach, or are they still pursuing a one-size-fits-all strategy?

JG: I think that now, with the foreclosure crisis and recession, there's a trend in our industry toward recognizing that many first-time home buyers or former homeowners will not be able to qualify to purchase a home for some length of time. It's a reflection of the fact that the mortgage market has changed. It's harder to get a loan now. There was a time when even people with highly compromised credit could walk into a lending institution and say, "I want to buy a home, and in fact I've already picked one out." It just doesn't happen like that anymore.

CD: Looking specifically at foreclosure mitigation, can you talk about recent trends you're seeing in the clientele who are seeking help?

JG: Since 2009, we've seen the direct impact of the troubled economy. The vast majority of people tell us that they're unable to make their mortgage payments due to loss of income. Early on in the foreclosure crisis, we tended to see lower-income people from communities where subprime lending was concentrated, such as North Minneapolis and the East Side of St. Paul. Today, we're seeing more consumers from suburban communities who have moderate incomes. They made good borrowing decisions up-front but are now in trouble with their lender due to the loss of a job.

CD: How are you reaching out to this new group of potential clients?

JG: We're trying to change where we share our messages. Several years ago we were focusing our outreach and events in particular areas of the Twin Cities' urban core, such as North Minneapolis and the East Side of St. Paul. Now we're trying to get out into the suburbs, in particular the first-ring suburbs. In Hennepin County, for example, we partnered with the public libraries to offer informational workshops about our services. We've developed a robust presence on the web and are using social media, since suburban households may be more likely to use those communication tools. We also try to maintain a steady presence in the traditional media by using both television and print to get our message out.

Part of the challenge for us in reaching out to these new, potential clients is that they've never had to avail themselves of community-based services to support their needs. Someone who has never had to reach out for help, has never had to seek out resources like job-training programs, food shelves, or any number of other community-based supports, is thinking, "How am I going to make things work?" We want them to know that there are resources available to them. In my opinion, these homeowners are particularly vulnerable to for-profit loss-mitigation services that cost a lot of money and aren't necessarily effective.

CD: Have the relationships between counselors and lenders improved, in terms of mitigating foreclosures on behalf of borrowers?

JG: Working with lenders and servicers is a frustrating part of the job, but I do think it's gotten better. Do I wish the process was quicker and more transparent? Absolutely. However, I do think lenders and servicers are now more willing to work with homeowners and us in an effort to keep borrowers in their homes. We've partnered with lenders to implement the federal government's Making Home Affordable Program and worked with them as they've designed their own programs. Nevertheless, we still hear that consumers are really frustrated when they try to work with lenders on their own. It's still a daunting process, and one that an individual homeowner may not have the patience or fortitude to see through to the end.

CD: What do you think is the top issue that counselors face when they're working with lenders and servicers?

JG: Inconsistency. Counselors rarely talk to the same person twice at a lending institution. When we do get through, we often get different answers and responses to our questions. Frankly, that's been one of the strategies that counselors have used: If you don't like the answer you get today, call back tomorrow and you may get a better one. While that can work to our advantage, it's rare, and we wish lenders and servicers were more consistent up-front. I think there's a fundamental need at the leadership level at those institutions to send a clear message down to their front-line staff that the job now is to keep people in their homes, and this is how we're going to do it.

CD: Nonprofits are facing unprecedented funding issues. Where does the Center stand, in terms of having enough resources to fulfill its mission?

JG: In early 2008, we received our first round of federal funding to support capacity building in our network. We also received generous support and assistance from Minnesota Housing to start building our capacity. We were able to go from 18 housing counselors around the state who do foreclosure counseling work to about 75. Thanks to both federal and state support, we were able to sustain that level of capacity for three years.

However, in mid-2010 we realized that we would face severe funding constraints starting later in the year. The last round of federal funding would be expended and any new resources from the federal government would not be available until 2011. We were facing a pretty significant gap for the second half of 2010 and all of 2011.

To address the gap, we worked with the Greater Minnesota Housing Fund and the Family Housing Fund to draft a proposal for Minnesota Housing to fund our network for the last couple of months of 2010 and all of 2011. Minnesota Housing committed $1 million, half of which needs to be matched by other private and public sources. All told, the sustainability plan is about $5.5 million. We're working to obtain federal funds, as well as local private and public funds, to make sure we have enough resources to continue through 2011. At the same time, we're looking to implement cost-saving measures in order to keep our network viable at a time when the demand is still very high. We don't want to return to the two-month waits that consumers experienced back in 2007 as we ramped up our capacity.

CD: In addition to the funding challenges, what other major challenges are the Center and the counseling organizations you work with facing?

JG: The Center and our nonprofit partners are part of the broader housing industry, and that industry is changing all the time. It's difficult for us to keep pace with new programs, new regulations, and new evaluations and requirements. We've begun to focus a lot of time and attention on monitoring new legislation, watching industry trends, and developing support programs that ensure that our counseling network remains responsive. One recent example was monitoring the implementation of the federal SAFE Act [the Secure and Fair Enforcement for Mortgage Licensing Act of 2008]. The act requires certification, bonding, training, and testing for loan officers but also has implications for foreclosure counselors. We spent a lot of time trying to understand that new legislation, trying to work with the Minnesota Department of Commerce to understand how it would be implemented and how it would affect counselors. We're also reaching out more to lenders and Realtors, trying to get a handle on the latest consumer trends and issues that they're seeing in their work.

CD: How do you see counseling changing in the future, both on the home buying and the foreclosure sides?

JG: On the home buying side, we're trying to address the need for different access points to services. We're partnering with the Housing Partnership Network, a national intermediary, to develop one of the first web-based tools for home buyer education in the country. We'll be piloting and releasing that this year. It's a tool designed to supply a customized learning experience in response to the individual consumer's needs. People can participate from home at a time that's convenient for them. Once prospective home buyers complete the online training, they'll meet in person with a counselor to see if they're ready for more in-depth education programs.

We're developing that tool, but we still understand the importance of home buyers and homeowners knowing who the trusted resources in their community are. So we're still keen on the idea that there are housing-oriented organizations that consumers can turn to if they need additional help. As a result, we remain committed to perpetuating the network model.

On the foreclosure front, since each consumer's needs are unique, it wasn't clear how to use the web and electronic-based services to deliver foreclosure counseling. Instead, we're looking forward to developing new relationships with lenders, in which lenders fully recognize the value of counseling and pay for our services. We think that'll be important for the sustainability of the network. In fact, we have two partnerships with institutions in the works right now that follow a fee-for-service model.

I think this is an interesting time to be in the homeownership counseling industry. The next wave of home buyer counseling and education will focus on institutionalizing the home buying process. Just as most people work with a Realtor and lending officer, they'll also start to work with a homeownership educator and advisor. We're starting to see that shift in thinking, and we're designing programs to support it. We think it's important for people to have a point of contact where they can learn about all of the programming, resources, and advice they need in order to work with Realtors and lenders. That's the role our network is playing and will continue to play.